See Where You’re Browsing in Terminal

When using Terminal, you might know of the pwd (print working directory) command, which returns the current directory you’re browsing. It’s useful if, like me, you get lost while browsing through folders! Well, under OS X Lion and Mountain Lion, there’s no need to use the command because the name of the directory appears in the title bar—just like in Finder. For example, if you’re browsing the Music directory in your user directory, you’ll see something like Music -- bash -- 80x24 (the last two details being the shell you’re using and the size of the Terminal window in characters).

Right-clicking the directory in the title bar will also display the folder hierarchy up to that point. Clicking any of the folders in the list will open a Finder window displaying the contents of that folder.